Half Year Results

RNS Number : 2549E

JPMorgan Indian Invest Trust PLC

28 May 2012

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN INDIAN INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST MARCH 2012

Chairman's Statement

Performance

The returns for the six months to 31st March 2012 belie the volatile nature of the markets over the period. Your Company saw an increase in diluted net assets of 1.8%, outperforming the return of the Company's benchmark, the MSCI India Index (in sterling terms), which rose by 0.4%. On an undiluted basis, the Company returned 0.6%. The Company's share price total return was 1.0%, reflecting the widening of the discount from 10.1% to 10.8%. The background against which the Company performed is discussed in more detail in the Investment Managers' Report below.

Gearing

The Company is finalising a one year floating rate US$25 million loan facility with RBS to provide the investment managers with the flexibility to gear the portfolio should circumstances permit. As at the date of this report, the Company is ungeared.

Discount Management

The Board has guidelines in place with regard to the management of any discount/premium that may develop between the Company's share price and its net asset value per share. The Company currently holds 4,394,788 Ordinary shares in Treasury and, under current guidelines, these may only be reissued at a premium to the prevailing net asset value at the time of reissue.

India/Mauritius Double Tax Treaty

The Indian government is in the process of introducing new tax legislation, including General Anti-Avoidance Rules, which could impose additional costs or obligations on the activities of the Company's Mauritian subsidiary and have adverse consequences if the Mauritian subsidiary ceased to qualify for the benefits under the India/Mauritius Double Tax Treaty. The Board and its advisors are monitoring developments closely.

Share Capital

In November 2008, the Company issued 21,001,937 Subscription shares to shareholders on the basis of one Subscription share for every five Ordinary shares previously held. Each Subscription share confers the right (but not the obligation) to subscribe for one Ordinary share on any business day during the period from 2nd January 2009 to 2nd January 2014, after which the rights under the Subscription shares will lapse.

As at the date of this statement, 14,864,680 of the original 21,001,937 Subscription shares (70.8%) have been converted, raising proceeds in excess of £35.4 million.

Further details of the Subscription shares, including the subscription periods and their respective prices and the bonus cost for the calculation of taxation, can be found on the Company's website at www.jpmindian.co.uk.

Outlook

Our Managers remain positive as to the prospects for Indian equities over the medium to long term, however over the short term, returns are expected to remain volatile.

Hugh Bolland

Chairman                                                                                                                      28th May 2012

Investment Managers' Report

Market Review

The first half of the Company's financial year was a remarkable period, with the final quarter of 2011 witnessing a 'risk off' led sell off and the first quarter of 2012 staging a dramatic turnaround with a 'risk on' led rally in risk assets. The MSCI India Index rose around 9% during the review but the fall in the Rupee detracted most of those gains. These extreme macro led moves were evident in portfolio flows, with foreign institutions investing a record US$9 billion during January to March 2012 after selling US$360 million during October to December 2011.

However, throughout this period, news flow out of India continued to be singularly miserable. The central government continued to be paralysed by a seemingly endless stream of corruption scandals that severely affected legislative activity for the better part of 2011. Besides, the dismal show of the Congress Party in the crucial state elections, where they were decisively marginalised in three out of the five (especially in Uttar Pradesh), has significantly worsened the political stalemate. The possibility of policy momentum picking up after the state elections, which encouraged the rally in January and February, now appears remote. In fact, the change in the political equation was evident in the equivocation over the railway budget in which the minister (belonging to the TMC, which is a coalition partner) was fired by his own party chief for raising passenger tariffs. He was replaced by another representative of the same party who promptly rolled back most of the increases. The Union budget was also a disappointment. In fact, certain proposals with regard to the taxability of foreign investments spooked the market and though the Finance Minister tried to allay the concerns of portfolio investors, confusion reigned supreme.

On the positive side, the Reserve Bank of India eased monetary policy for the first time in 18 months by cutting policy rates by 0.5% in April and the cash reserve ratio (CRR) twice in January and in March by a cumulative 1.25%. However, the commentary continued to be hawkish, implying that further loosening was unlikely in the very short term. This was mainly due to worrying signs of inflation rising in early 2012 after easing materially in late 2011. Meanwhile, growth momentum in the economy continued to decelerate with GDP for the fourth quarter of 2011 growing below expectations at 6.1% with Gross Fixed Capital Formation (GFCF) declining year-on-year for a second straight quarter. Year-on-year trade data deteriorated significantly in March, with exports showing a decline for the first time in over two years while imports rose 24%, leading to a jump of over 300% in the trade deficit. The resulting deterioration in the balance of payments further added to the concerns on the Rupee.

Earnings for the review period were a mixed bag, with a few high profile disappointments (notably Infosys) and hardly any positive surprises. However, the thin silver lining is that earnings forecasts have stabilised, after being steadily cut through 2011.

Performance Review

The Company outperformed the benchmark in the fourth quarter of 2011 as the quality bias embedded in the portfolio contributed to relative performance. The same attribute hurt performance in the first quarter of 2012 as low quality high beta stocks outperformed. However, for the review period as a whole the Company modestly outperformed the benchmark.

Outlook and Fund Strategy

The near term outlook remains extremely fluid and depends almost entirely on domestic and global macro factors. The move to defer the implementation of some of the controversial tax proposals should help sentiment and spur a relief rally in the currency and equity markets. However, much more would be required by way of policy action to sustain any such rally, which looks extremely unlikely in the uncertain political climate in India.

Rukhshad Shroff

Raj Nair

Investment Managers                                                                                                        28th May 2012

Interim Management Report-

The Company is required to make the following disclosures in its Half Year Report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into the following broad categories: investment and strategy; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational; and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th September 2011.

Any change in taxation legislation or taxation regime applicable to the Mauritian Subsidiary could affect the value of the investments held by the Group, affect the Company's ability to provide returns to Shareholders or alter the post-tax returns to Shareholders. In particular, it is intended that the Mauritian Subsidiary will continue to benefit from the India/Mauritius Double Tax Treaty. Future changes to Mauritian or Indian law or to the India/Mauritius Double Tax Treaty, or the interpretations given to them by the regulatory authorities, could impose additional costs or obligations on the activities of the Mauritian Subsidiary, which in turn may have adverse effects on the performance of the Company. The terms of the India/Mauritius Double Tax Treaty were challenged in India but were upheld by the Supreme Court of India in October 2003. However, more recently, there have been discussions between the Indian and Mauritian authorities with regard to re-negotiation of the Treaty. Adverse tax consequences would result if the Mauritian Subsidiary ceased to qualify for the benefits under the India/Mauritius Double Tax Treaty (for example, if it were held that the Mauritian Subsidiary was not a resident of Mauritius). There can be no assurance that the Mauritian Subsidiary will continue to qualify for or receive the benefits of the India/Mauritius Double Tax Treaty or that the terms of the India/Mauritius Double tax Treaty will not be changed. Such an event may require the Mauritian Subsidiary to pay or provide for tax liabilities that would reduce the net asset value of the Ordinary shares.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Going Concern

The Directors believe, having considered the Company's investment objective, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i) the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half-Yearly Financial Reports'; and

(ii)     the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

For and on behalf of the Board

Hugh Bolland

Chairman                                                                                                                           28th May 2012

For further information, please contact:

Andrew Norman

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 6000

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmindian.co.uk

Group Income Statement

for the six months ended 31st March 2012

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st March 2012			31st March 2011			30th September 2011
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	1,306	-	1,306	1,627	-	1,627	7,145	-	7,145
Other income	15	-	15	21	-	21	56	-	56
Gains/(losses) on investments
held at fair value through profit
or loss	-	7,773	7,773	-	(22,673)	(22,673)	-	(129,005)	(129,005)
Foreign exchange (losses)/gains	-	(163)	(163)	-	94	94	-	(26)	(26)
Total income/(loss)	1,321	7,610	8,931	1,648	(22,579)	(20,931)	7,201	(129,031)	(121,830)
Management fee	(2,809)	-	(2,809)	(3,474)	-	(3,474)	(6,725)	-	(6,725)
Other administrative expenses	(670)	-	(670)	(705)	-	(705)	(1,533)	-	(1,533)
(Loss)/profit before finance
costs and taxation	(2,158)	7,610	5,452	(2,531)	(22,579)	(25,110)	(1,057)	(129,031)	(130,088)
Finance costs	(185)	-	(185)	(326)	-	(326)	(508)	-	(508)
(Loss)/profit before taxation	(2,343)	7,610	5,267	(2,857)	(22,579)	(25,436)	(1,565)	(129,031)	(130,596)
Taxation	-	-	-	-	-	-	-	-	-
Net (loss)/profit	(2,343)	7,610	5,267	(2,857)	(22,579)	(25,436)	(1,565)	(129,031)	(130,596)
(Loss)/earnings per Ordinary
share (note 4)
- undiluted	(2.02)p	6.55p	4.53p	(2.49)p	(19.70)p	(22.19)p	(1.36)p	(112.20)p	(113.56)p
- diluted	(2.00)p	6.49p	4.49p	(2.41)p	(19.02)p	(21.43)p	(1.32)p	(108.85)p	(110.17)p

The Group does not have any income or expense that is not included in net (loss)/profit for the period. Accordingly the 'Net (loss)/profit for the period' is also the 'Total comprehensive income for the period', as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.

The 'Total' column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary 'Revenue' and 'Capital' columns are prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

All of the (loss)/profit and total comprehensive income is attributable to the equity shareholders of JPMorgan Indian Investment Trust plc, the Company. There are no minority interests.

Group Statement of Changes in Equity

	Called up			Exercised		Capital
Six months ended	share	Share	Other	warrant	Capital	redemption	Revenue
31st March 2012	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2011	29,486	76,903	41,929	5,886	327,620	6,362	(14,469)	473,717
Exercise of Subscription shares
into Ordinary shares	(23)	23	-	-	-	-	-	-
Issue of Ordinary shares on
conversion of Subscription
shares	563	5,007	-	-	-	-	-	5,570
Repurchase of shares
into Treasury	-	-	(7,056)	-	-	-	-	(7,056)
Net profit/(loss) for the period	-	-	-	-	7,610	-	(2,343)	5,267
At 31st March 2012	30,026	81,933	34,873	5,886	335,230	6,362	(16,812)	477,498

	Called up			Exercised		Capital
Six months ended	share	Share	Other	warrant	Capital	redemption	Revenue
31st March 2011	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2010	29,051	72,861	41,929	5,886	456,651	6,362	(12,904)	599,836
Exercise of Subscription shares
into Ordinary shares	(12)	12	-	-	-	-	-	-
Issue of Ordinary shares on
conversion of Subscription
shares	296	2,629	-	-	-	-	-	2,925
Net loss for the period	-	-	-	-	(22,579)	-	(2,857)	(25,436)
At 31st March 2011	29,335	75,502	41,929	5,886	434,072	6,362	(15,761)	577,325

	Called up			Exercised		Capital
Year ended	share	Share	Other	warrant	Capital	redemption	Revenue
30th September 2011	capital	premium	reserve	reserve	reserves	reserve	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2010	29,051	72,861	41,929	5,886	456,651	6,362	(12,904)	599,836
Exercise of Subscription shares into
Ordinary shares	(18)	18	-	-	-	-	-	-
Issue of Ordinary shares on
conversion of Subscription shares	453	4,024	-	-	-	-	-	4,477
Net loss for the year	-	-	-	-	(129,031)	-	(1,565)	(130,596)
At 30th September 2011	29,486	76,903	41,929	5,886	327,620	6,362	(14,469)	473,717

Group Balance Sheet

at 31st March 2012

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2012	31st March 2011	30th September 2011
	£'000	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	451,698	561,746	460,324
Current assets
Other receivables	1,579	286	1,946
Cash and cash equivalents	24,407	15,663	11,768
	25,986	15,949	13,714
Current liabilities
Other payables	(186)	(370)	(321)
Net current assets	25,800	15,579	13,393
Net assets	477,498	577,325	473,717
Equity attributable to equity holders
Called up share capital	30,026	29,335	29,486
Share premium	81,933	75,502	76,903
Other reserve	34,873	41,929	41,929
Exercised warrant reserve	5,886	5,886	5,886
Capital reserves	335,230	434,072	327,620
Capital redemption reserve	6,362	6,362	6,362
Revenue reserve	(16,812)	(15,761)	(14,469)
Total equity	477,498	577,325	473,717
Net asset value per Ordinary share (note 5)
- undiluted	412.1p	502.0p	409.7p
- diluted	406.0p	483.5p	398.7p-

Group Cash Flow Statement

for the six months ended 31st March 2012

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2012	31st March 2011	30th September 2011
	£'000	£'000	£'000
Operating activities
Profit/(loss) before taxation	5,267	(25,436)	(130,596)
Add back interest paid	185	326	508
Add back (gains)/losses on investments held at fair
value through profit or loss	(7,773)	22,673	129,005
Net sales of investments held at fair value
through profit or loss	16,398	10,415	5,505
Increase in other receivables	(207)	(149)	(63)
Decrease in amounts due from brokers	574	4,823	3,077
Decrease in other payables	(134)	(175)	(96)
Decrease in amounts due to brokers	-	(3,471)	(3,599)
Net cash inflow from operating activities before
interest payable and taxation	14,310	9,006	3,741
Interest paid	(185)	(326)	(508)
Tax paid	-	(137)	(137)
Net cash inflow from operating activities	14,125	8,543	3,096
Financing activities
Net proceeds from the issue of shares	5,570	2,925	4,477
Repurchase of shares into Treasury	(7,056)	-	-
Net cash (outflow)/inflow from financing activities	(1,486)	2,925	4,477
Increase in cash and cash equivalents	12,639	11,468	7,573
Cash and cash equivalents at the start of the period	11,768	4,195	4,195
Cash and cash equivalents at the end of the period	24,407	15,663	11,768

Notes to the Group Accounts

for the six months ended 31st March 2012

1.    Principal activity

      The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.

2.   Financial statements

      The financial information for the six months ended 31st March 2012 and 2011 has not been audited or reviewed by the Company's auditors.

      The financial information contained in these half year accounts does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

      The information for the year ended 30th September 2011 has been extracted from the latest published audited financial statements. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

3.   Accounting policies

      The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board to the extent that they have been adopted by the European Union.

      Where presentational guidance set out in the Statement of Recommended Practice (the 'SORP') for investment trusts issued by the Association of Investment Companies in January 2009 is consistent with the requirements of IFRS, the financial statements have been prepared on a basis compliant with the recommendations of the SORP.

      The accounting policies applied to these half year accounts are consistent with those applied in the accounts for the year ended 30th September 2011.

4.   (Loss)/earnings per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2012	31st March 2011	30th September 2011
	£'000	£'000	£'000
(Loss)/earnings per share is based on the following:
Revenue loss	(2,343)	(2,857)	(1,565)
Capital profit/(loss)	7,610	(22,579)	(129,031)
Total profit/(loss)	5,267	(25,436)	(130,596)
Weighted average number of Ordinary shares in issue during
the period used for the purpose of undiluted calculation	116,185,568	114,623,396	114,998,087
Weighted average number of Ordinary shares in issue during
the period used for the purpose of diluted calculation	117,350,741	118,687,611	118,541,866
Undiluted
Revenue loss per share	(2.02)p	(2.49)p	(1.36)p
Capital profit/(loss) per share	6.55p	(19.70)p	(112.20)p
Total profit/(loss) per share	4.53p	(22.19)p	(113.56)p
Diluted
Revenue loss per share	(2.00)p	(2.41)p	(1.32)p
Capital profit/(loss) per share	6.49p	(19.02)p	(108.85)p
Total profit/(loss) per share	4.49p	(21.43)p	(110.17)p

5.   Net asset value per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2012	31st March 2011	30th September 2011
Undiluted
Ordinary shareholders' funds £'000	477,498	577,325	473,717
Number of Ordinary shares in issue	115,865,433	114,997,059	115,625,322
Net asset value per Ordinary share (pence)	412.1	502.0	409.7
Diluted
Ordinary shareholders' funds assuming exercise of
Subscription shares £'000	495,414	599,645	494,486
Number of potential Ordinary shares in issue	122,021,755	124,033,755	124,033,755
Net asset value per Ordinary share (pence)	406.0	483.5	398.7

      The diluted net asset and value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the period end. The Company will only re-issue shares held in Treasury at a premium and therefore these shares have no dilutive potential.

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

A copy of the half year has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do

The half year will also shortly be available on the Company's website at www.jpmindian.co.uk 

where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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